IMF Further Downgrades Forecast for China's Economy

China to grow 1% in 2020, but 8% in 2021. Compared to much of the world, any growth in the year of Covid-19 is positive.

Author: Belinda Zhou   

The International Monetary Fund cut its world economic outlook(WEO) growth projections for major economies once again on Wednesday after its April report, due to the uncertain recovery amid the Covid-19 outbreak.

The Washington-based financial institution said China's economy is projected to grow 1% in 2020, only to come back roaring in 2021 with 8.2% in 2021. The nation's robust stimulus was cited as the main driver for the expected growth next year. 

China is the only economy seeing positive growth projections in 2020 among the over 20 major economies listed in the WEO report. 

To compare, the fund projected a 1.2% growth for the Chinese 2020 output and a 9.2% growth in 2021 in its April WEO forecast.

"We are now projecting a deeper recession in 2020 and a slower recovery in 2021," the institution wrote in its latest report on Wednesday.

IMF reported that the global output is projected to contract sharply by 4.9% this year, 1.9 points lower than its April forecast of a negative 3% growth. Before the Covid-19 crisis, the organization guided a 3.3 % growth in 2020 and 3.4% for 2021.

The fund said the Covid-19 pandemic triggered the worst recession since the Great Depression. IMF also downgraded its forecasts for the U.S., saying that the economy may shrink by 8% in 2020. 

The Euro Area suffered two-digit recession guidance for 2020. France, Italy, and Spain will see their economies shrink by 12.5%, 12.8%, and 12.8%, respectively. Other developed economies are also hitting the skids. The United Kingdom and Canada may drop by 10.2% and 8.4% in 2020. 

"The unprecedented global sweep of this crisis hampers recovery prospects for export-dependent economies and jeopardizes the prospects for income convergence between developing and advanced economies," the report said.

the emerging markets of Mexico, Brazil, and Russia are also expecting a similarly grim 2020. These struggling economies are expected to shrink by 0.5%, 9.1%, and 6.6%, respectively. 

The downwards revisions were largely in line with the world map of global Covid-19 infection cases from Johns Hopkins University.

The U.S. ranked top in the number of confirmed cases as of midday Thursday, totaling 2.4 million. Brazil and Russia followed with 1.2 million cases and 613,000 cases. 

Some countries like Spain, the United Kingdom, and China have seemingly passed the infection peak, while others like Brazil, Mexico, and India are still adding thousands of cases every day.

Covid-19 confirmed cases worldwide totaled 9.5 million as of midday Thursday.